Consider the following data for a closed economy: Y = $15 trillion C = $8 trillion I = $2 trillion TR = $2 trillion T = $2 trillion Use the data to calculate the following. (Enter your responses as integers.)

Use these data to calculate the following:

a. Private saving

b. Public saving

c. Goverment purchases

d. The goverment budget deficit or budget surplus

Question

Business

Edward Orozco

24 October, 04:10

Consider the following data for a closed economy: Y = $15 trillion C = $8 trillion I = $2 trillion TR = $2 trillion T = $2 trillion Use the data to calculate the following. (Enter your responses as integers.)

Use these data to calculate the following:

a. Private saving

b. Public saving

c. Goverment purchases

d. The goverment budget deficit or budget surplus

+2

Answers (1)

Know the Answer?

Anne Carlson · Answer 1

A. Private Savings =

Explanation:

Requirement A:

Private savings states that how much money resident people can save in an economy.

We know, Private savings = Income of residents (Y) + Transfers (TR) - Consumption (C) - Tax (T)

Given,

Y = $15 Trillion; TR = $2 Trillion; C = $8 Trillion; T = $2 Trillion.

Therefore, private savings = $ (15 + 2 - 8 - 2)

Private savings = $7 Trillion.

Requirement B

Public savings dictates that the saving from the government throughout a period in an economy.

We know, Public savings = Government revenue (T) - Government spending (G) - Transfers (TR)

As we do not have spending amount, we have to use althernative formula to find public savings.

Therefore, National Savings (I) = Public Savings + Private savings

Public Savings = National Savings - private savings;

Public Savings = ($2 - $7) Trillion (Private savings from requirement A).

Public savings = - $5 Trillion.

Requirement C;

Government purchase is the government spending throughout a specific time span. It can be calculated through the use of public savings formula. That is:

Public Savings = Government revenue (T) - Government spending (G) - Transfers (TR)

From Requirement B, we get, Public savings = $5 trillion

Therefore, public savings = $2 - G - $2

Or, - $5 = G

Or, G = - $5

Requirement D:

From the requirements B and C, it can be easily said that the government is in Budget deficit. When the spending of any economy of a country is more than that country's tax revenue, it is called budget deficit of the country's economy. It means the government is spending more and a negative savings plan.

Budget deficit = Government spending - Tax revenue = $ (5 - 2) = $3 trillion.